Clear Eyed Capitalist

Archive for November, 2008

I’ve been working on the financials for the housekeeping cooperative I’m working with, and a key question in my mind is: how can the housekeepers maximize their take-home pay? I’m evolving the model to the point where I can do a sensitivity analysis and test such variables as hours-worked, ratio of housekeepers to managers, %of time billable vs unbillable, and others. I have a gut-feel idea, but I want to run the data. As I’m working with the spreadsheet, I get the sense that a key factor in keeping costs down (and therefore profits up, and therefore take-home pay up) is turnover – bringing on new members entails additional expense in training, uniforms, possibly additional equipment. This is also why it’s worth doing the modeling to see how much benefit is achieved from growth as well.
Turnover and the associated costs of recruiting new employees are recognized as controllable business costs. Certainly every recruiting agency advertises their ability to help you save on recruitment via better targeting. There’s also the cost of lost investment in the employee who leaves and the lost productivity during the change. The total cost of just the turnover is often estimated as being equivalent to the annual salary of the position turning over.

According to the 2005 California Occupational Guide for “Maids and Housekeeping Cleaners”: “Housekeeping jobs have a high turnover rate due to the low rate pay.” This suggests that in housekeeping, as well as similar job categories, turnover might not be a controllable cost. Large corporations have responded by trying to make their jobs turnover proof – in my MBA economics class it was called “de-skilling”: the art of fragmenting and regimenting a production process so that the human roles require minimal training or decision making – often by supplementing with automation. Turnover costs are reduced by reducing investment in people.

From a cooperative perspective, this solution is unacceptable; developing people is part of the business. I don’t know how these housekeepers will decide to move forward– and in a democratic organization it will be up to them– though of course I anticipate providing them with as much fodder as possible for good decision making. But I feel confident predicting it will be a path that creates a longer career ladder supported by additional training so that members don’t have to leave. But even if they still left, we would consider it a success if they left for a better job.

It struck me that if we could measure it, how turnover occurs would be a good measure of corporate social responsibility – or perhaps better called corporate contribution to the community. How much of turnover is because people are moving up, and how much of turnover is simply churn? This is not a wholly new idea, critics before me have raised that complaint that one way risk has been transferred from organizations to individuals over the last several decades is decreasing investment in training – instead you’re expected to already have the skills for the job and it’s up to you to fund their acquisition. That shift directly decreases access to “opportunity to get ahead” and takes us further from our national ideals. But perhaps tracking turnover is an opportunity for companies who want to demonstrate their value to the community to do so.